Swindon & Wiltshire Business News

Mixed reaction from local experts to Budget 2018

on 30 October 2018.

Philip HammondThere has been a mixed reaction from the Swindon and Wiltshire business community to Chancellor Philip Hammond’s pre-Brexit Budget, with some announcements welcomed, while others were treated warily. As always, the business world did not get everything it had asked for, and questions remained over some headline statements as economists went off to crunch the numbers and examine the small print.

The Chancellor promised to deliver a Budget for hard-working families," and the headline announcement was that the rise in personal tax allowances was being brought in a year early.

Richard MathewsRichard Mathews, chief executive of Optimum Professional Services, which offers accountancy and legal services in Swindon, said: "It was good to hear that the increases in personal allowance and higher rate tax are being introduced a year early.

"We’re also pleased that stamp duty relief for first-time buyers is being extended, and backdated, to those in shared ownership. Help with business rates, freezing the VAT threshold, raising the annual investment allowance and freezing duties are all good news.

"But the Chancellor said nothing about pensions or about National Insurance, and I find that silence a bit worrying. As ever, the devil will be in the detail.

The business rates shake-up was also welcomed.

Hannah Essex, co-executive director of policy and campaigns at the British Chambers of Commerce said: "We’re delighted that the Chancellor has heeded our calls to abandon the uprating of business rates for the high street for the next two years, and gone further by cutting bills for the vast majority of high street firms.

"It’s crucial that we support our town centres as they find their place in a changing world.

“An alarming number of high street firms, both large and small, are closing or being earmarked for closure. This deterioration has cost thousands of jobs since the start of 2018.

"While there are long-term structural changes taking place, including changes to consumer habits, the tipping point for many of these firms has been the unnecessarily large burden that business rates place on them. Therefore, this short-term reduction in rates will be very welcome news to those on the high street who require urgent respite.

“Business rates are a heavy burden that throttle all firms with steep bills regardless of how well they’re doing or the economy is faring.

"We have also called on the Chancellor to ensure that all businesses have a 12 month delay on increased business rate bills when improving an existing property or moving to a new premises. In the long term we will continue to call for fundamental reform of the broken business rates system.”

Adam RaineyAnd Adam Rainey, regional director for the South West at Lloyds Bank Commercial Banking, said: “Businesses across the South West of England prioritised a freeze or cut to business rates and an increase in investment in transport infrastructure in our pre-budget survey, so they will broadly welcome the measures to address those issues that the Chancellor announced today.

“The pledge to slash business rates for independent retailers could prove to be a lifeline for many stores in the region’s high streets, helping create a better environment for business growth and freeing up cash to invest in new opportunities.

“The region’s firms also wanted continued investment in infrastructure, and the extra funding that has been allocated for this is a step in the right direction to help improve connectivity across the region, particularly for rural communities.”

Announcing a new digital services tax, which could see online multinationals like Amazon, Google and Facebook hand over a greater share of their UK profits in tax, the Chancellor told the Commons: "The rules of the game must evolve now if they are to keep up with the emerging digital economy.

"It is only right that these global giants. with profitable businesses in the UK, pay their fair share."

Ian LarrardThere were words of caution, however. Ian Larrard director of Business West in Swindon and Wiltshire said: "Nobody would disagree that businesses should pay their fair share.

"However, it would be counterintuitive to penalise tech companies and put at risk investment in the UK economy, particularly in light of the emphasis on embracing new technologies in the industrial strategy white paper.

It was a view echoed by Suren Thiru, head of economics at the British Chambers of Commerce, who said: "While businesses understand the need to build a tax system fit for the future, the government must tread very carefully in introducing a digital services tax.

"Tight classifications of exactly which businesses will fall under the scope of these new rules are important to avoid unintended consequences or confusion for the industry as a whole."

Martin GurneyThe increase to the Annual Investment Allowance – the 100 percent tax allowance for the purchase of certain capital items – from £200,000 to £1 million, was welcomed by Martin Gurney, tax partner at Haines Watts Swindon. But he warned business owners: "Care will be needed as the rules governing allowances accounting periods straddling 1 January 2019 or 31 December 2020 may be complex."

Suren Thiru of the BBC added: "We are also pleased that the Chancellor delivered on our call to incentive investment in new buildings through a two percent capital allowance.”

The Chancellor also announced a rule change on the tax status of self-employed people working for private sector companies.

IR35 is aimed at stopping tax dodging by disguising employment through so-called personal service companies, which will cost the exchequer £1.3bn a year by 2023-24, according to HM Revenue and Customs.

But a note of caution came from Ian Larrard, who said: "It is unfair to suggest that professional service companies are simply a tax avoidance mechanism, when the reality is that most contractors have no choice but to use a limited company.

"The time is probably right, however, to review these tax rules given that the last change in legislation came back in 1999.

"A major concern for businesses will be that these changes make it more difficult to recruit contract workers in what is an already tight labour market, therefore highlighting the need for further investment in training and skills.

There was also a broad welcome for the decision to keep the VAT threshold unchanged, and for the extra £420 million to tackle Britain's potholes.

The pledge of an extra £200 million to bring full fibre broadband connectivity will also be welcomed by businesses in Wiltshire more remote locations.

Minette Batters, a Wiltshire farmer and president of the NFU, said: "We are pleased to see that there is a significant £200m investment in piloting new solutions to deploy full fibre internet in rural locations.

"It is vital that this is not a one-off investment and it must be part of a continued effort to deliver better connectivity for all rural businesses.

The Budget was delivered against revised growth figures from the Office of Budget Responsibility, which now expects the economy to grow by 1.6 percent next year, and 1.4 percent in 2020 and 2021, before picking up to 1.5 percent in 2022 and 1.6 percent in 2023.

Guy FosterGuy Foster, head of research at Marlborough-based wealth management company Brewin Dolphin said: "The dramatic improvement in the outlook for the UK’s public finances gave the chancellor enough leeway to fund previous government pledges of extra money on the National Health Service and housing without big increases in taxes.

"Borrowing has persistently come in under forecast. The OBR expects borrowing to be £11.6bn lower than forecast at the Spring Statement.

"While there were some giveaways, his Budget was notable for its lack of eye-catching announcements.

"Fortunately, that meant there were also few tax increases – and where they did occur they were aimed at companies not households. The chancellor focused on trying to stimulate growth through enterprise and intellectual property, notably targeting big digital companies without wanting to hit tech start-ups.

"With pensions, savings and estate planning largely untouched for now, we see this reprieve as a good opportunity to make the most of the tax allowances that already exist.

"While Mr Hammond avoided the temptation to tinker with the tax system, it might not last long. The huge uncertainty over precisely how the UK will leave the European Union means the chancellor specifically said he may have to upgrade the Spring Statement to a full Budget."

Finally, it wouldn't be a Budget round-up without a mention of beer duty. George Arkell, MD, Arkell's Brewery said: “We welcome today's news of the freeze on beer duty.

"The Government's support in the growth and innovation of our sector has enabled us to make strong investments in our brewery in recent years, which is reflected in the quality and selection of beer we make.

"This is a positive thumbs up in the Government's confidence in pubs and breweries and the crucial social and economic contribution they make to the UK."